Everyone is focused on the ramifications of the latest Washington-manufactured crisis. This drama will surely be resolved within a day or two of the country running out of money, after which the country can begin surveying the economic road ahead. It’s an increasingly bumpy ride. The latest drop is confidence is being overhyped by the mainstream media to detriment of the real story: The index peaked over four months ago and has been steadily declining since. A weak job market and rising interest rates are the main culprits, and these two factors will remain headwinds indefinitely.
Japan has suffered from the effects of a strong yen for over a decade. This strength has spurred Japan, Inc. to offshore more factories over the years. The truth is that there is not a large Japanese export sector anymore. Exports have been range bound since the end of the Great Recession:
Meanwhile, lower export levels together with decreasing income from foreign investments have pushed the Japanese current account to historical lows. Note the downward trend:
Japan is set to join the ranks of debtor nations in 2014. Good luck selling 10 year bonds with sub-1% yields when that happens.
The article’s lede is merely half-true:
German exports (GRBTEXMM) rose in August amid signs the economic recovery is continuing in the euro area, the country’s biggest trading partner.
While there are positive signs in the Eurozone economy, they are overwhelmed by the bad news. The writer hypes an unemployment rate that fell a mere 10 bps to 12% and one positive retail sales report while refusing the place this information into context. The reason the unemployment rate fell is because the workforce shrank, not unlike the current situation here in the United States:
The Eurozone’s employed workforce is the smallest it has been since 2006 and has continued shrinking despite the”recovery.” Furthermore, retail sales are awful. Despite the blip upward from July to August, sales were still below August 2012 levels and remain about where they were at the end of the GFC:
And how about those German export numbers? They are a mixed bag:
They seemingly peaked in early 2012, but that won’t stop the mainstream media from claiming that the Eurozone “recovery” will spur the periphery to drive German export growth. Please show me that import growth because two of Germany’s largest customers are still cutting back:
No one should act surprised that the IMF has cut its world growth forecasts for this year and next, because it has been doing so since 2011. Old economic models do not work in the New Normal and must be adjusted. Until this happens, these numbers will continue missing to the downside. At the present time, overstating economic growth is working out well for the IMF as it makes unsustainable sovereign debt loads seem reasonable so that it can continue wasting money on various Eurozone bailouts. Now let’s have a little fun. If anyone finds the last time the IMF succeeded in predicting a worldwide recession, please post the link in the comments. I won’t hold my breath.
The mainstream media is severally months behind the blogosphere in breaking news. While bloggers have been discussing housing market concerns since May, the msm seemed blithely unaware of the problems until the last week or two. These are the only two charts you need to ascertain the future state of the U.S. housing market:
Rate increases raise the real price of buying a home and people’s incomes are not keeping up.